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How credit scores affect your mortgage rate

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Key takeaways

  • A high credit score could save you thousands of dollars in mortgage interest payments over the life of your loan
  • Lenders consider your score an indicator of how likely you are to repay the loan
  • Consider taking steps to improve your score before applying for a mortgage

Your credit score represents your overall credit history. It’s based on information in your credit report, which includes whether you pay your bills on time and the total debt you carry.

How mortgage lenders use credit scores

Credit scores generally range from 300 (the lowest) to 850 (the highest). This number can make a big difference in determining whether you qualify for a mortgage and the terms you are offered.

A higher score increases a lender’s confidence that you will make payments on time and may help you qualify for lower mortgage interest rates and fees. Additionally, some lenders may reduce their down payment requirements if you have a high credit score.

What credit score do you need to get the best mortgage rate?

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Exceptional 800-850
Very good 740-799
Good 670-739
Fair 580-669
Poor 300-579

Sources: FICO and Experian

Sources: FICO and Experian

A high score

A score of 670 or higher is considered good. Lenders differ, but they generally want to see a score of at least 620 before offering most home loans. Mortgage lenders also consider things like your credit report, level of debt and income.


A low score

If your score is below 620, you may still be able to qualify for a loan backed by the Federal Housing Administration. FHA loans tend to have higher interest rates and fees.

Where to find your credit score

Many banks and credit card issuers provide credit scores for free on statements or through online accounts and mobile apps. If your bank doesn’t provide that service, you may have to pay to get your credit score. You can buy your FICO credit score at Myfico.com.

How a high credit score could save you money

Let’s say, for example, you plan to get a 30-year fixed-rate mortgage for $300,000. Here’s what your loan could look like if you had a credit rating in the 760 to 850 range, compared with one in the 620 to 639 range. Not only would your monthly payment be lower, but you could save $95,680 on interest over the life of the loan.

760-850 credit score 620-639 credit score
APR1 2.694% 4.283%
Monthly payment $1,216 $1,482
Interest paid $137,704 $233,384

1 APRs are based on national averages and do not reflect Bank of America’s rates.
Source: myFICO.com, October 2021.

This example is provided for comparison purposes only and does not constitute a commitment to lend nor is intended to guarantee that you currently qualify for the example APRs above.

4 ways to boost your credit score

Your credit score can change every month, and even a small increase can help when applying for a mortgage. Here are some steps you can take to improve your score:

Make sure you pay all of your bills on time.

Pay off as much credit card debt as possible. Lenders prefer that balances be less than 30 percent of your available credit.

Check your credit reports and promptly correct any errors. Visit AnnualCreditReport.com to get a free copy of your report.

Avoid closing old credit card accounts or open new ones.

Close Disclaimer

The material provided on this website is for informational use only and is not intended for financial, tax or investment advice. Bank of America and/or its affiliates, and Khan Academy, assume no liability for any loss or damage resulting from one’s reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional and tax advisor when making decisions regarding your financial situation.

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